Free Income Statement Template for Small Business

In this article, we share with you how easy it is to create your own income statement. We also give you a free income statement template in MS Excel, including formulas that will automatically calculate your profit (or loss) for you.

Once you have completed your income statement, you may want to put a business plan in place. You can do this using our free business plan template. However, if you want to make things easy for yourself, you could use a business planning tool. We recommend Liveplan, which comes with 500 professional business plan templates.

Free Excel Income Statement Template

(Note: If you open this spreadsheet, you can copy andsave as your own and then edit the content as you wish)

What is an Income Statement Template?

Your business’s income statement can also be referred to as the statement of operations or the statement of profit and loss, which is sometimes shortened to P&L. The income statement summarises all of the operations of your business and the free income statement template is the generally accepted way of presenting this . It helps to to keep track of all of your income or sales, all of expenses or costs and the profits or losses that result in a given period of time.

Not only can you keep track of your historic profits and losses for a given period, you can also use the income statement template to create a forecast profit and loss. This will help you to understand how your business operations will perform in future, and understanding this will help you to plan better.

The free income statement template we have provided has four tabs. The first two provide examples of monthly and yearly income statements. The remaining two provide blank templates for you to use to create your own.

How to use Your Free Income Statement Template

It only takes a few seconds to get started, just follow the following three steps.

Step 1 – Click on the free download option

Simply click on the download link above, copy the Excel spreadsheet, and save it as your own.

Step 2 – Populate the Income Statement Template

Choose either the monthly or yearly template from the tabs at the bottom of the spreadsheet. Then populate this with your own trading numbers.

Step 3 – Interpret your Income Statement

Once you have fully populated your chosen template, you are ready to interpret your business trading performance. We have provided some simple guidance to help you get started.

Interpreting Your Free Income Statement Template

Once you have populated your income statement, it is equally important to interpret it correctly. Why? Because this will help you to protect your profits, reduce any potential for losses and gain a better understanding of how your business is trading.

Revenues

At the top of your income statement template is the income that you receive from providing your customers with goods or services. This is referred to as revenue, which can come from more than one stream or source. This is often also called sales or turnover. Use whichever term you are most comfortable with, they all mean the same thing.

Direct Operating Costs

The next item below revenues is direct operating costs. This is also often referred to as cost of goods sold or cost of sales. For example, if you are a retailer, the cost of your stock or inventory will be one of your main operating costs.

Gross Profit

The income statement template will automatically deduct your direct operating costs from your total revenues. What results is your gross profit or loss. It is important not to confuse this with your net profit or bottom line. To calculate that we will first need to deduct other costs you incur.

Gross Profit Margin

If you take your gross profit and divide it by your total revenue, you will arrive at your gross profit margin. This is a useful calculation that you can complete for yourself. It will help you to keep an eye on your gross profit margin and make sure that all your hard work results on a healthy profit. See further below.

Indirect Operating Costs

The next item below this is your indirect operating costs. These include all the costs that cannot be attributed to one customer sale, otherwise known as overheads. For instance; rent, marketing, selling and distribution are all common examples of indirect operating costs that most businesses incur.

Operating Income

The income statement spreadsheet automatically calculates your operating income. It does this by deducting your direct operating costs and your indirect operating costs from your total revenue. This is also known as profit or earnings. Again, use whichever term you are most comfortable with as they all mean the same thing. Your operating income can also be referred to as EBIT (Earnings Before Interest and Taxation).

Cost of Debt Financing

Then the cost of any debt financing ai automatically deducted, this includes interest expense and any bank charges you incur during the relevant period. If you do not have a business loan, overdraft or any banking costs, you can remove this line altogether or leave it in with a zero balance.

Earnings Before Tax

Next your cost of debt financing is automatically deducted from your operating income to arrive at your profit or earnings before tax.

Taxation

Finally, your income tax is automatically deducted to arrive at your net earning or profit. This is the money you take as profit or reinvest, also known as the bottom line.

The Juice Press

In this article we have provided you with a free income statement template in MS Excel. We also provided some simple steps and guidance on how to use it. Related to this, you may also want to complete a breakeven analysis if you are starting a new business. This will help you to understand how long it will take to cover your startup costs and start making a profit.

Once you have completed your income statement, you may want to consider upgrading your business plan using a small business planning tool. We recommend Liveplan, which comes with 500 professional business plan templates.

Related Articles

About the Author

Vittorio is a staff writer for SmallbizJuice, specializing in financing including bank loans, angel investing and other sources of small business finance. Over the last 23 years, Vittorio has been a banker, a small business financial director and an angel investor in startups. These days he writes on finance and provides financial advice to several businesses as a small business funding expert. Outside of work, Paul is a keen cook and loves nothing more than to cook Puglian cuisine of course!